St-Hilaire – Tax Court of Canada finds that the expedited handling of a bankruptcy proposal prejudiced the taxpayer by denying him an ABIL

The definition of a business investment loss includes a capital loss from the a disposition of a debt owing by a small business corporation to which s. 50(1) applies; and s. 50(1) can be elected to apply to a debt owing to the taxpayer at year end which is established to have become a bad debt in the year.

The taxpayer was denied an ABIL, respecting a debt owing to him by his small business corporation which was extinguished due to the acceptance in the year of a proposal made under the Bankruptcy and Insolvency Act, because the debt thereby was no longer owing to him at the end of his taxation year. It seems anomalous that he might have gotten a better result if the corporation had merely been insolvent at year end without formal proceedings having been completed.

Neal Armstrong.  Summary of St-Hillaire v. The Queen, 2014 TCC 336 under s. 50(1).